Here we go again, and right when E&P executives are trying to finalize their 2015 budgets and service company salesmen are watching that dynamic unfold with bated breath. The U.S. benchmark crude oil, West Texas Intermediate, had dropped about 20% since June to $80 per barrel (bbl) by mid-October, and at press time, some doomsayers said it might go below $75. The Brent benchmark had fared no better, falling 22% to about $85, testing two-year lows.

“There are two dynamics going on right now: there’s just too much oil and it’s crashing up against lower demand,” said Russell Gold, The Wall Street Journal reporter for energy, who spoke to the Houston Energy Finance Group in mid-October. “It’s creating a lot of discord within OPEC. They need high cash flow, so things will get very interesting, very quickly.”

The debate now is whether OPEC will defend price or market share regardless of price.

“The seeds of this were planted back when an engineer figured out how to frack the Barnett Shale,” added Gold, who majored in history at Columbia University.

Blame the price plunge on a dramatic negative cocktail: the stronger dollar, surging U.S. supply, slowing demand growth all over the world, jittery economic projections, and hedge funds that were once long oil that decided to bail out today. About that supply: the Energy Information Administration says domestic production is about 8.7 million barrels per day (MMbbl/d) now—going to 9.5 MMbbl/d in 2015. It estimates shale fields will add an incremental 1.1 MMbbl/d by year-end and another 963,000 bbl/d in 2015.

Who is going to be hurt most by this oil price fall? OPEC or U.S. shale oil producers? Russia? Some say first, it will be Venezuela and Mexico. A few geopolitical observers think this is some plot cooked by the U.S. and Saudi Arabia to punish Russia for its Ukraine fiasco.

The effect on American investors and rig activity could be dramatic, yet we’ve seen this scenario play out before. A Tudor, Pickering, Holt, & Co. research note says that for its North America E&P coverage universe, if oil falls by $10/bbl, about 100 rigs would stop drilling and 2015 cash flow for its E&P universe would decline by an aggregate $10 billion.

A key question for all is, what is the breakeven oil price needed in various oil plays?

Maria van der Hoeven, executive director of the International Energy Agency, said recently, “Some 98% of crude oil and condensates from the United States have a break-even price of below $80, and 82% had a break-even price of $60 or lower.”

Bernstein Research says, overall, an average $85 is needed for the majors such as Shell and BP that have to manage huge, long-term and complex projects.

Much more detailed breakeven estimates from R.W. Baird research reports said this: The best play, the one most insulated from declining oil prices, is the Eagle Ford Shale. Oil output in the core area where the best wells are located breaks even at $65/bbl, while Eagle Ford oil that’s liquids-rich is at $53. Next on the list is North Midland Basin Wolfcamp oil, breaking even at $57/bbl, and in Reeves County, Texas, the Wolfcamp A at $68. By the way, as activity in the greater Permian Basin continues to mount, an RBC Capital Markets report projects that an estimated 7,000 fracture stimulation jobs will be performed annually in 2015 and 2016, the most of any play in the country.

Keep in mind that where your acreage is in a play, and how much you paid to get those leases originally, matter a great deal. For example, according to Baird, oil in the Bakken Shale core area breaks even at $61 a barrel, whereas noncore oil production in the play would require the price to be as high as $75.

The new South Central Oklahoma Oil Province (Scoop) condensate play in Oklahoma breaks even at $71, although if developments follow the norm, that price will come down as soon as more wells have been drilled and the completion techniques are further refined.

We live in extraordinary times these days, and any prediction is subject to immediate revision due to any number of factors.

Be sure to read our update on U.S. LNG export plans in this issue. Between the U.S., Mexico and Canada, some 40 LNG projects have been proposed, amounting to about 50 Bcf/d of new natural gas demand. (For context, the U.S. produces about 76 Bcf/d now.)

The LNG market definitely merits a closer look. That’s why recently Hart Energy acquired Zeus Development of Houston, bringing its LNG experts, newsletters and conferences to our growing energy portfolio. Please consider attending our North American LNG Exports Conference on Nov. 20-21 in Houston, for a complete update. Now in its fifth year, this event enables you to hear directly from LNG experts and project operators who will discuss what is proposed, what is feasible, and what impact all this could have on domestic gas producers.

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